China's New 'Love Craze' -- Black Market iPhones

Nov. 20, 2007

By AVENTURINA KING

Despite rampant rumors of a deal between Apple and China's largest cellphone carrier, no one knows when the iPhone is supposed to hit China officially. But that hasn't stopped Apple's popular smartphone, known in China as "Ai Feng" ("Love Craze"), from becoming a bona fide black-market hit.

In one Chinese netizen's words: "It's like the whole country has gone iPhone, all my friends have become iPhoners."

The iPhone is readily available in computer superstores in most large Chinese cities. In Beijing's Zhong Guancun, a 15-story mall filled with technology vendors, almost all the stalls are stocked. Two weeks ago, the blogger of Too Many Resources for the iPhone asked several of these vendors whether they could sell him 100 iPhones. They all answered "No problem."

Chinese websites have iPhone fever, too. A search through blog-hosting site Sina returns more than 63,000 posts mentioning the iPhone. There are forums providing instantaneous updates of cracking software (to keep up with Apple's twitchy defense mechanisms) and large support communities -- the largest, bbs.iphone.com, has 170,000 members. Zhong Guancun's homepage gives visitors the Amazon treatment, providing price quotes from various vendors (the cheapest stall, number 1601 B, is selling the unlocked 8-GB model for 3,799 yuan, or $474), starred reviews, Q&As, delivery terms and after-purchase services.

Although these services may look legitimate, the Chinese iPhone market is completely unauthorized. All of the iPhones sold in China are unlocked, and not a single one has Apple insurance or warranty coverage. Although the iPhone is manufactured in China, the device has to sneak around commercial gatekeepers to reach Chinese consumers, taking a circuitous route back to its birthplace.

Most iPhones bound for the Chinese market are first illegally imported into Hong Kong, according to local media reports. From there, workers carry them a short way across the border to Shenzhen (one person can bring in as many as a thousand a day). They are then shipped to all of China's major cities. An alternate, more-direct route is by eBay and international shipping.

Despite Apple's attempts to stem the flow of black-market iPhones by requiring credit cards for purchase and limiting buyers to two iPhones per person, the illegal trade continues. Indeed, Chinese prices for iPhones are at an all-time low, proof of how efficiently these channels provide stock.

The black-market trade started shortly after the iPhone's June 29 U.S. launch. On Aug. 3, a user going by the handle "n000b" first uploaded iPhone unlocking directions in Chinese under the subject "My iPhone can make phone calls." The unlocking method was incomplete, and the phone couldn't receive calls but, as he wrote, "it's better than just having a Wi-Fi iPod."

N000b didn't receive much publicity, and the first wave of iPhones that washed over Shenzhen in the beginning of August still comprised unlocked phones. Stripped of communications capabilities and lacking support for Chinese characters, these devices were glorified, nearly useless PDAs. They sold for $1,200 to $2,400 apiece and weren't much of a hit with Chinese consumers.